The MBA Scholarship Wars: An Often Frenzied Pursuit For The Best Students

“DISCOUNT MBA DEGREES, GET ‘EM WHILE THEY’RE CHEAP!!!”

It’s not a sign you’ll see hanging from any respectable business school, but highly regarded institutions across the U.S. are increasingly providing deep MBA discounts as they fight ferociously over the most talented applicants.

Rivers of scholarship cash are flowing from schools to candidates—well over $200 million a year from the top 25 U.S. business schools alone—drastically cutting MBA costs for many students. As the money pours forth, it’s countering the rise in tuition costs, creating a two-tier market for a business education. There’s the high sticker price for the degree, and then there’s the discounted price for the most sought-after candidates.

At the moment, schools’ battle for students has become so frenzied that several prominent schools are quietly negotiating with candidates, often competing with rival offers from other MBA programs. And some second-tier institutions have quietly contacted at least one major admissions consulting firm to present a highly unusual proposition: send your most impressive clients to us, and we’ll give them scholarship funds that we’ve set aside especially for your clients.

‘IT’S A NUCLEAR ARMS RACE,’ SAYS ONE PROMINENT DEAN

Surging numbers of international applicants plus a growing number of MBA spaces globally are ratcheting up the intensity in the battle for students, so schools are spending more and more money on scholarships, says Alison Davis-Blake, dean of the Ross School of Business at the University of Michigan. Some buy candidates that will improve a school’s standing in business school rankings that measure incoming GMAT and GPA scores and outgoing salaries and job offers. Other schools are simply hoping to land the best and brightest to their programs in the expectation that their latter success will reflect well on the institution.

“It’s a nuclear arms race,” Davis-Blake says, before switching metaphors to address tug-of-wars over stellar applicants. “It’s more like hand to hand guerrilla warfare – it’s fought sort of person by person. There are people that are going to be more in demand, and you have to negotiate with them individually. “We see scholarship amounts increasing. We see more large awards. We see a broader array of students getting awards.”

The Top 25 business schools in the U.S. annually dole out some $232.7 million in scholarship money to their MBA students, according to estimates compiled by Poets&Quants. No school beats Harvard when it comes to the biggest pile of cash: A $31.5 million scholarship war chest for little more than 1,800 MBA students, up from $22 million just four years ago.  All told, Harvard Business School’s scholarship money is roughly 29% of the school’s gross tuition revenues. Another way to look at this: HBS is routinely discounting the sticker price of its MBA by 29%.

HBS HAS THE LARGEST WAR CHEST, BUT STILL DOESN’T GIVE THE MOST AS A PERCENT OF TUITION

Yet, as high as that support is, there are still other prestige MBA programs offering more. Rice University’s Jones Graduate School of Business, with a $6.7 million scholarship budget for just 216 MBA students, is handing out scholarship support equal to 59% of the school’s MBA tuition revenue. Washington University’s Olin School and Notre Dame University’s Mendoza School are also known for their generosity. Both schools are spreading so much scholarship aid that they are at 39% and 37%, respectively, of their gross tuition revenue.

It’s also not merely a game played by the more well-endowed private institutions. Several highly selective public universities have more recently anted up, including the University of Michigan’s Ross School and UCLA’s Anderson School. Ross now boasts a financial aid budget $19.2 million, with an estimated $15.4 million in scholarship funding equal to nearly 28% of its tuition revenue; Anderson has more than doubled its scholarship support in the past five years to $12.1 million from $5.8 million.

In fact, it’s a rare school that has not significantly boosted its scholarship funds in recent years or is not in the midst of a fundraising campaign for which a major portion of the new money will go to discount tuition. At Yale University’s School of Management, Dean Edward “Ted” Snyder says scholarship funds now total 13% of gross tuition revenue for the 2014-2015 academic year, up from only 5% in 2011-2012. For Yale, that roughly translates into a $6.2 million pot, still well below many peer schools.

AT STANFORD, SCHOLARSHIP MONEY HAS RISEN BY 44% IN THE PAST FIVE YEARS

In most cases, the increases in scholarship support have vastly outstripped the off-putting sticker price of the degree. At Stanford Graduate School of Business, tuition has gone up by 16% in the past five years, but the pool of money available for scholarships has risen 80% to $15.7 million this year from $8.7 million. Stanford’s average student fellowship grant this year is $35,830, higher than any other business school. Many MBA admission consultants now claim to have won their clients multiple millions of scholarship aid. Stratus Admissions Counseling, an admissions consulting firm based in New York, says its MBA clients alone have captured more than $15 million in scholarships since 2011.

This is largely an American business school game. Most of the leading European schools, which have meager endowments and are far behind in tapping alumni for fundraising campaigns, have very little money to lure the world’s best students. INSEAD, for example, has just $3.8 million in scholarship money for more than 1,000 MBA students, less than 5% of its estimated gross revenue tuition of $80.2 million, or less than one-fourth the median scholarship support at a Top 25 U.S. school.

In the U.S., many admission officers are shocked at how aggressive the awards have become, especially to candidates whose GMAT scores are under 700. “It is crazy the money that some schools are throwing at people,” says Rob Weiller, associate dean of admissions at UCLA’s Anderson School of Business. “People who we were offering nothing to were getting five-digit aid packages from schools ranked in the top five. I hate the arm’s race it creates, but that is the reality. If you want to play and compete that is what you have to do today.”

BOOTH OFFERRED $20K TO A WOMAN WITH A GMAT SCORE OF 660 LAST YEAR

This past year, he recalls, a solid candidate with a sub-700 GMAT declined an offer from a Top 20 school and agreed to attend UCLA’s Anderson School of Management. “But they came back and offered him a $40,000 scholarship three weeks before the school’s MBA program started,” says Weiller. “We said, ‘Look, that’s a lot of money and you should be flattered but we are not going to match offers.” The candidate decided to honor his commitment to start in Anderson’s MBA program.

Admission consultants say even Wharton has negotiated with candidates, offering a full ride to a woman with a 780 GMAT this past year who was also accepted by MIT Sloan. In some cases, money is being thrown at applicants who in years past would never have qualified for a merit scholarship. A female candidate with a 660 GMAT score was offered $20,000 a year from the University of Chicago’s Booth School this past year. “She had a solid GPA, undergraduate and work background, but we were not blown away by her,” says a rival admissions director.

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